Does Financial Performance of Islamic Banking is better? Panel Data Estimation

Setyawati, Irma; Suroso, Sugeng; Suryanto, Tulus; Nurjannah, Dini Siti

doi:10.35808/ersj/661

Cited by 75 publications

(76 citation statements)

References 22 publications

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“…Although banks may have a high rate of NPF, Islamic banks in Indonesia have other income sources that can cover bank losses due to high NPF. The results of this study rejected the findings of Purbaningsih (2014) and Setyawati et al, (2017) who found that NPF had a negative effect on the bank's performance.…”

Section: Results/findingscontrasting

confidence: 97%

The Relationship Between Human Capital Investment, Non- Performing Financing and Profitability

Mukhibad

Anisykurlillah

Jayanto

2020

HSSR

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Purpose of the study: This research aims to identify the influence of good corporate governance (GCG) mechanisms and human capital investment (HCI) on non-performing financing (NPF) and profitability. In addition, we examine the relationship between NPF and profitability. Methodology:The research samples are commercial Islamic banks in Indonesia (13 banks) that were determined by using a purposive sampling method. The data are collected from the banks' financial statements and GCG reports, from 2012 to 2016. Structural Equation Modeling (SEM) was employed to analyze the data.Main Findings: Our study shows that the number of directors a bank has significantly affected NPF but does not affect profitability, while the size of the independent Board of Commissioners (BoC) has a significant influence on NPF and profitability. Sharia Supervisory Board also has a role in improving profitability. HCI has a significant effect on profitability, but it does not affect NPF.Applications of this study: Islamic banks are urged to improve their implementation of GCG, especially for their ratio of independent commissioners and HCI expenditure. Independent commissioners and HCI are able to reduce the level of NPF and improve performance. HCI expenditure should be viewed as an investment by the bank, and not as a cost. Investment in HCI is proven to improve profitability. Novelty/Originality of this study:The use by researchers of the HCI variable to influence NPC is still limited. The reason is that the main source of a bank's income is from financing (loans), so the highest risk for the bank is NPF. To reduce NPF, the bank's employees must have the ability to manage risk.Each SSB also has a role in improving its bank's profitability. When performing its duties in providing advisory services to the directors, each SSB will evaluate the bank's compliance with Sharia principles and the market's response. This necessitates that the members of each SSB not only understand Islamic law but also economics and finance/banking. HCI has a significant effect on profitability and does not affect NPF. HCI is undertaken by banks to improve their employee's expertise, experience, and capabilities, and let them acquire new ones. This is an investment that can provide returns and improve banks' performance. The absence of a relationship between HCI and NPF shows that employee training on creditworthiness analysis techniques and risk management still needs to be improved.

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Section: Results/findingscontrasting

confidence: 97%

The Relationship Between Human Capital Investment, Non- Performing Financing and Profitability

Mukhibad

Anisykurlillah

Jayanto

2020

HSSR

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“…Risk is one of the factors that affect the firm's value, the risk of affecting the firm's value through cash flow (Damodaran, 2006;Lusht, 1977), and also throughcompany costs such as agency cost (Petacchi et al, 2012;Naito and Laux 2011;Stulz, 2002), the compensation of the managers, a decrease in the cost of financial distress and bankruptcy and lack of investment management (Bartram, 2006;Carter, Rogers et al, 2006;Bartram and Bodnar, 2007;Bartram et al, 2009;Aretz and Bartram, 2010;Allayannis et al, 2012;El-Charami, 2014;Thalassinos and Politis, 2011;Thalassinos et al, 2012;Setyawati et al, 2017;Glavina, 2015). The previous studies on the effect of risk on the firm's value, carried out in a variety of topics.…”

Section: Business Risk and Firm's Valuementioning

confidence: 99%

Commodity Prices, Exchange Rates and Investment on Firm's Value Mediated by Business Risk: A Case from Indonesian Stock Exchange

Risman¹,

Salim²,

Sumiati³

et al. 2017

ERSJ

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This paper examines the influence of six commodity prices (Crude Oil, Coal, CPO, Gold, Nickel, Tin), exchange ratesand investment on the firm's value during the period 2010-2014, both directly and indirectly through the mediation of business risk.By applying Common Effect approach for panel data on path analysis model, we found the oil price and exchange rate (USD/IDR) are affect the firm's value, either directly or indirectly through business risk asmediation variable,but business risk does not mediate the effect of the investment on the firm's value.The study's findings support previous research results and evidence of theories, especially about the relationship of commodity prices, exchange rates, risks and value of the company.These results are useful for individual and institutional investors, managers and policy makers.

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“…On another hand, some empirical literature indicates that the Islamic banks' stability is worse than conventional banks because moral hazard and asymmetric information bear on the profit-and-loss sharing system (Kabir, Worthington, & Gupta, 2015;Lassoued, 2018). Volume 24, Issue 1, January 2020: 40-52 | 42 | 2016; Setyawati et al 2017;Sriyana, 2015;Widarjono, 2018;Risfandy, 2018;Octavio & Soesetio, 2019), efficiency of Islamic banks (Hosen & Rahmawati 2016;Aisyah & Hosen, 2018;Majdina, Munandar, & Effendi, 2019) and credit risk of Islamic banks (Firmansyah, 2015;Husa & Trinarningsih, 2015;Nugraheni & Muhammad, 2019). Our present study examines Islamic banks' financial stability in Indonesia.…”

Section: Introductionmentioning

confidence: 99%

Stability of Islamic banks in Indonesia: Autoregressive Distributed Lag Approach

Widarjono

2020

Jurnal Keuangan Dan Perbankan

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Islamic banks in Indonesia are very vulnerable to the instability of their business processes because of their small market share. Moreover, based on their financial performances, Islamic banks are worse than those of conventional banks due to lower profits (ROA) and higher Non-performing financing (NPF). Our study investigates the stability of Islamic banks. We measure the stability using Z-score and NPF. Instead of an individual bank, the study applies an aggregate data of Islamic banks encompassing Islamic commercial banks along with Islamic business units. Monthly time series data, covering January 2010 to December 2018 are selected. We apply the Autoregressive Distributed Lag (ARDL) model. The findings document that the Islamic bank's specific variables affecting stability are size, CAR, and efficiency. The larger size and CAR support the Islamic bank's stability. Lower efficiency increases the Islamic bank's instability. Meanwhile, Inflation and exchange rates affect the Islamic bank's stability. Economic downturns due to inflation and depreciation of rupiah increase the instability of Islamic banks. AbstrakBank Islam di Indonesia sangat rentan terhadap ketidakstabilan proses bisnis mereka karena pangsa pasar yang kecil. Selain itu, berdasarkan kinerja keuangan mereka, bank syariah lebih buruk daripada bank konvensional karena laba lebih rendah (ROA) dan pembiayaan bermasalah (NPF) lebih tinggi. Penelitian ini menyelidiki stabilitas bank Islam. Stabilitas keuangan diukur dengan menggunakan Z-score dan NPF. Penelitian ini menggunakan data agregat bank syariah yang mencakup bank komersial syariah bersama dengan unit bisnis syariah. Data yang digunakan adalah bulanan dari Januari 2010 hingga Desember 2018. Penelitian ini mengaplikasikan model Autoregressive Distributed Lag (ARDL). Temuan penelitian ini mendokumentasikan bahwa variabel spesifik bank Islam yang memengaruhi stabilitas adalah besarnya asset, CAR, dan efisiensi. Aset dan CAR yang tinggi mendukung stabilitas bank syariah. Efisiensi yang lebih rendah meningkatkan ketidakstabilan bank syariah. Sementara itu, inflasi dan nilai tukar memengaruhi stabilitas bank Islam. Penurunan ekonomi akibat inflasi dan depresiasi rupiah meningkatkan ketidakstabilan bank Islam.

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Does Financial Performance of Islamic Banking is better? Panel Data Estimation

Cited by 75 publications

References 22 publications

The Relationship Between Human Capital Investment, Non- Performing Financing and Profitability

The Relationship Between Human Capital Investment, Non- Performing Financing and Profitability

Commodity Prices, Exchange Rates and Investment on Firm's Value Mediated by Business Risk: A Case from Indonesian Stock Exchange

Stability of Islamic banks in Indonesia: Autoregressive Distributed Lag Approach

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